Reform: A committee approves curbs on political contributions by insurers. A contentious vote is expected when the measure reaches the full Assembly.

SACRAMENTO — A bill to clean up the scandal-ridden office of the California insurance commissioner by restricting campaign contributions from insurance companies cleared a key legislative committee Thursday, ensuring a crucial and probably contentious vote before the full Assembly.

Born out of the controversy involving former Insurance Commissioner Chuck Quackenbush, who quit under pressure in July, the legislation would limit donations from insurance companies that have regulatory proceedings before the commissioner to $250 in a 12-month period. Currently, as with all statewide elected offices, there are no limits on political contributions.

In his six years in office, Quackenbush accepted more than $8 million in donations from the industry he regulated. Under the proposed law, the vast majority of those contributions would be illegal.

The bill, SB 953 by state Sen. Jackie Speier (D-Hillsborough), marks one of the first serious efforts to curb California's no-limit campaign rules in statewide contests. In several other states, federal courts have ruled such restrictions valid for regulatory agencies where the source of campaign funds is limited to special interests.

Speier described the bill's narrow escape from the Assembly Appropriations Committee Thursday as "a huge step." She said the bill would not have survived without the last-minute intervention of Assembly Speaker Bob Hertzberg (D-Van Nuys) and majority leader Kevin Shelley (D-San Francisco).

"It was not a natural childbirth," Speier said. "I think we face a battle on the Assembly floor. It's not a slam-dunk by any means."

The insurance industry, which opposes the bill, annually contributes millions of dollars to legislative campaigns, and many legislators are reluctant to cut off the flow.

In a hint of the upcoming fight, three Democrats defied Hertzberg to vote no on the bill: Lou Papan (D-Millbrae), Roderick Wright (D-Los Angeles) and Gil Cedillo (D-Los Angeles). Republicans Dick Ackerman of Fullerton, Roy Ashburn of Bakersfield and Marilyn Brewer of Newport Beach also voted against it.

Consumer advocates hailed the committee vote.

"This bill will move the state closer toward restoring the integrity of the office of the insurance commissioner and insulating it from the cash-register politics played by the insurance industry during the Quackenbush administration," said Jamie Court, an insurance specialist with the Foundation for Taxpayer and Consumer Rights in Santa Monica.

However, Doug Heller, a lawyer with the Santa Monica organization, said he is concerned that the wording of the bill, which limits insurance contributions if the company is engaged in "formal" proceedings before the commissioner, might offer a loophole.

"Very few actions rise to the level of a formal proceeding," said Heller, "so this may be a giant loophole." Also on Thursday, the appointment of former San Francisco appellate court Justice Harry W. Low to serve the remaining two years of Quackenbush's term was unanimously approved by both houses of the Legislature.

Nominated for the post by Gov. Gray Davis, Low, 69, retired eight years ago after a distinguished 26-year judicial career. He later served as an arbitrator, sometimes in cases involving insurance disputes.

In Assembly confirmation hearings this week, Low said he handled 10 to 15 insurance related arbitrations a year but none of them would affect his decisions as commissioner.

Low said he would not accept any money from insurance companies or other sources, describing it as "inappropriate." But Low said he has not ruled out the possibility of running for the office in 2002.

"Justice Harry W. Low," Hertzberg said before the unanimous Assembly vote, "is exactly what the Department of Insurance needs at this important crossroads in its history."

There are still bills pending in the Legislature to convert the insurance commissioner post to an appointed position, which it was before 1990. If it remains an elected position, the proposed restrictions could greatly hamper candidates' ability to raise the millions of dollars that a statewide campaign typically costs in California--a point that opposing lawmakers are likely to make during the Assembly debate.